How Big Is Obama’s Tax Hike?

by Patrick Brennan

Ezra Klein had a post on the Washington Post’s Wonkblog yesterday entitled “Honestly, Obama’s tax hike is pretty small.” This would prima facie seem to contradict the point of my NRO piece from last week, in which I deemed the president’s proposed revenue increases (amounting to $1.6 trillion over the next ten years) “big enough to rank up there on the Mount Rushmore of revenue,” when comparing it with previous policies the U.S. government has undertaken to raise revenue. (The Cliff’s Notes: It’s almost the biggest as a share of the economy since World War II, and it’s probably the biggest ever in inflation-adjusted dollars). But I actually also basically agree with Klein’s point, which compares the president’s tax proposals not to historical averages, but to other detailed deficit-reduction proposals for the next decade (notably, though, not including Paul Ryan’s).

He demonstrates the compariosn via a chart (natch):

So both accounts are true: President Obama is proposing a historically significant increase in the revenues the federal government brings in, and he’s proposing less revenue than others have to cover our current spending trajectory — presumably in part because he is less concerned about the adverse effects of debt and deficits than Alan Simpson or Alice Rivlin, but also because he’s a politician who’s not willing to own up to the cost of funding the welfare state the U.S. has created and he’s substantially expanded. Thankfully, Klein is a bit more honest about it, admitting that “higher taxes are essential to the liberal project” (a topic Ross Douthat has commented on as well). But further, because of rapidly rising health-care costs, an aging population, and the economic-growth levels to which it looks like the rich world must get accustomed, higher taxes are needed to maintain the American government as we know it (a project the Republican party, as a matter of political realism, essentially now seems to support).

You don’t need to raise Simpson-Bowles levels of revenue, but conservatives and liberals must admit that, unless they want to do away with large chunks of the U.S. government (Social Security, Medicare, a military that can lead the world) or risk pushing government debt well over 100 percent of GDP, we’re going to need higher taxes than we have right now. (Paul Ryan’s budget essentially avoids this by assuming that we will essentially do away with discretionary spending, and dramatically cut the size of Medicaid — it is also actually less aggressive about deficit reduction certainly than Simpson-Bowles.) Broadly speaking, the vast majority of Americans want to keep all of these things the same, and so they’re going to have to pay for it.

The problem with the president’s placing a priority on revenue increases, then, is not that he is fighting to raise revenue in order to maintain our government, but to expand it categorically (as he did via health-care reform) and ensure that no reforms will be necessary to slow its automatic, marginal expansion. The revenue the president plans to generate (and the base he’s picked, those making over $250,000 a year) are sufficient to maintain the American government, not fund the liberal project. So even if we allow that he has greater tolerance for debt and deficits than the plans Klein picks for comparison, the fact that Obama’s plan is “pretty small” means that it’s also pretty likely to lead to more tax increases, and soon, we’re definitively not talking “pretty small” anymore.

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